Belgian Coalition Talks on Hold as Di Rupo Seeks to Quit

Elio Di Rupo went to meet the king after six-party talks to hammer out a 2012 budget and cut the deficit to 2.8 percent of gross domestic product next year ran aground. Photographer: Benoit Doppagne/AFP/Getty Images

Nov. 22 (Bloomberg) -- Belgium’s coalition talks were
suspended as Elio Di Rupo offered to resign from leading the
negotiations after the six parties involved failed to agree
about how to cut the budget deficit.

King Albert II put his decision on hold after receiving Di
Rupo’s resignation offer during a meeting yesterday, the royal
palace said in a statement. Di Rupo, 60, went to meet the king
after six-party talks to hammer out a 2012 budget and cut the
deficit to 2.8 percent of gross domestic product next year ran
aground.

“The king asks each negotiator to take some time for
reflection in the coming hours, consider the consequences of a
failure and actively seek a solution,” according to the
palace’s statement. “He reminds” them “about the gravity of
the current situation.” The king will meet with each of the six
parties today, Belga newswire reported.

Belgium may face European Union sanctions as early as next
month for failing to tackle a budget deficit that’s projected to
widen in 2012 because of slowing economic growth. After 17
months, Belgian coalition talks have produced only institutional
agreements over the distribution of tax revenue and regional
fiscal autonomy. It’s the second time Di Rupo has offered his
resignation to the king since his appointment on May 16 to form
a federal government.

Budget Shortfall

Belgian government bonds fell today and the extra yield
investors demand to hold the nation’s 10-year securities instead
of German bunds of similar maturity, Europe’s benchmark, widened
6 basis points to 296. The so-called spread reached a record 321
basis points on Nov. 17.

The EU forecast on Nov. 10 that Belgium’s budget shortfall
would widen to 4.6 percent of GDP next year from an estimated
3.6 percent this year.

Belgian coalition negotiators assumed the economy’s
expansion will slow to 0.8 percent in 2012, which would
translate into a deficit of 5.3 percent of GDP without spending
cuts or additional taxes, according to projections by the High
Council of Finances published on Oct. 31.

King Albert didn’t accept Di Rupo’s first resignation offer
in July after Bart De Wever’s New-Flemish Alliance, the top
vote-getter in the June 2010 election, refused to revive
coalition talks that broke down 10 months earlier.

Institutional Aspects

Di Rupo, the president of the French-speaking Socialists,
instead left out the Flemish nationalist party and started
eight-party talks about institutional aspects that required a
two-thirds majority in parliament. He began six-party
government-formation talks in October.

The EU plans to move against Belgium for failing to take
“effective action” to tackle the deficit unless it presents a
2012 budget by mid-December, Amadeu Altafaj, spokesman for EU
Economic and Monetary Affairs Commissioner Olli Rehn said last
week. Rehn said on Nov. 10 that Belgium needs to provide
“convincing evidence of permanent fiscal measures” to tackle
its budget shortfall by the middle of next month.